NFLX vs. PSKY: Wells Fargo Downgrades Ratings on WBD Bid ‘Scars’

Wells Fargo analyst Steven Cahall resumed coverage of Netflix NFLX -0.15% ▼ and Paramount Skydance PSKY +2.13% ▲ shares after the Warner Bros. Discovery WBD -0.18% ▼ buyout war ended last week. He downgraded NFLX to a Hold rating from his prior year’s Buy rating, with a $105 price target (6% upside potential). For PSKY, he cut from a Hold rating to Sell, with a $10 price target implying 16.6% downside.

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Cahall is a top analyst on TipRanks, ranking #1,155 out of 12,127 analysts tracked. He has a 55% success rate and an average return per rating of 7.50%.

NFLX Stock Should ‘Rebound’ Soon

The streaming giant recently pursued but failed to acquire Warner Bros., a move aimed at consolidating content libraries and bolstering its position against rivals like Disney+ DIS -0.85% ▼ and Amazon Prime Video AMZN -2.62% ▼ in a maturing market saturated with subscriptions.

Cahall predicts Netflix will rebound from this setback by accelerating content production, potentially ramping up originals and live events to drive higher user engagement and combat churn rates that spiked from last year’s password-sharing crackdowns and ad-tier shifts. He sees a 25-30x price-to-earnings (P/E) multiple as the new normal, down from peak valuations during the pandemic boom, signaling moderated growth expectations. Overall, Cahall believes the “scars” on NFLX stock from the acquisition drama, economic headwinds, and competition can begin to heal as execution improves.

PSKY’s Risk and Leverage Warrant a Sell

Paramount Skydance agreed to buy WBD for $31 per share, outbidding Netflix after a months-long bidding war. The deal values WBD at $81 billion equity plus $29 billion debt, creating a media behemoth with HBO, CNN, DC, and Paramount franchises but straining PSKY’s balance sheet.

Cahall cited elevated leverage risk post-deal for the Sell rating. He flagged above-average debt as a key negative, amid softening ad markets and streaming losses. Cahall warned that earnings miss or sector derating could drive shares “far lower” from recent $12-$15 levels, echoing post-merger integration woes in a competitive landscape with Netflix and Disney.

Which Is the Better Media Stock According to Analysts?

According to TipRanks’ Stock Comparison Tool, analysts have assigned a Strong Buy consensus rating to Netflix and a Moderate Sell rating to Paramount Skydance, echoing similar reasons as Cahall.

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